IEA tells Australia to stockpile more oil

* Private holdings of emergency supplies keep it out of
coordinated release plans

By James Grubel

CANBERRA, Nov 19 The West's energy watchdog
urged Australia on Monday to build up its emergency oil
supplies and stop relying on industry stockpiles, which are too
low to meet international commitments due to higher oil imports.

The recommendation, from the International Energy Agency's
review of Australia's energy policies released on Monday, would
allow the country to join the body's international efforts to
coordinate the release of emergency stocks when needed.

As a member of the IEA, adviser to industrialised nations on
energy policy, Australia is obliged to keep stockpiles of 90
days of oil supplies. But the reserves are all held by the oil
industry, rather than the government, and the stockholdings
regularly fall well below the 90-day limit.

"IEA strongly recommends that the Australian government take
action to become fully and systematically compliant with its
international energy programme stockholding commitments,"
Executive Director Maria van der Hoeven said, while releasing
the Australian energy review in Canberra.

"The establishment of emergency stockholding to meet the
minimum commitment would also create the means for Australia to
contribute to an IEA collective action with the use of emergency
stocks."

Van der Hoeven said Australia was the only IEA member to
rely on commercial holdings, which were previously considered
sufficient when the country was a net oil exporter or only
imported small amounts of oil.

But Australia's increased reliance on oil imports since 2000
meant the stockholdings were no longer adequate to meet the
90-day commitment, the IEA said.

"The IEA estimates that compliance will likely be around 70
days throughout 2012," it said, adding that the figure could
improve slightly in 2013 with a short-term increase in domestic
production.

The private holdings of Australia's emergency supplies meant
the country could not take part in the IEA's coordinated release
of stockpiles last year, to help counter the loss of oil
production from then strife-torn Libya.

Australian law gives the resources minister the power to
impose stockholding requirements on the industry, or specific
reporting obligations, in the event of an emergency. Companies
report on a monthly basis now.

At the end of 2010, Australia's total oil stocks, held by
industry, were 38.1 million barrels, of which 45 percent was
unrefined oil, the IEA said. The stocks have fluctuated between
35 million and 45 million barrels over the past five years.

Oil demand in Australia averaged 960,0000 barrels a day in
2010, and has grown by one percent a year on average since 2000,
when the country's crude production peaked, the IEA said.

Australian net oil imports, including crude and refined
products, were 393,000 barrels a day in 2010, it said, with
nearly 330,000 barrels a day of domestic production exported,
mainly to South Korea, Thailand and China.

In September the government forecast Australia would produce
23.4 million litres of crude oil and condensate in the year to
June 30, 2013, an annual increase of 2.6 percent, and export
19.7 million litres, an increase of 2.5 percent.

At the same time, Australia is forecast to import 28.9
million litres, down 2.2 percent on the year, the Bureau of
Resources and Energy Economics said in its September forecasts.

Australia's refining capacity is shrinking in the face of
competition from mega refineries in Asia, adding to the problem.

In 2003, ExxonMobil closed its Adelaide refinery at
Port Stanvac, while Shell Australia plans to close its
Clyde refinery near Sydney and convert it to an import terminal
by mid-2013.

In September, Caltex Australia said it would shut
its loss-making 124,500 barrel-per-day Kurnell oil refinery in
Sydney in late 2014 and convert it into an import terminal.
That will leave Australia with five operating refineries.

Resources Minister Martin Ferguson welcomed the IEA's review
of Australian energy policies, but made no comment on whether
the government would now stockpile its own oil supplies.

A spokeswoman said the recommendation would be considered by
the government as it studies future energy policies.

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